This is a controversial post. There is much debate in the entrepreneurship community over what is the biggest mistakefounders make when starting a business. Most people don’t even know where to begin. From not having enough money, launching a product with too many bugs, not finding the right product-market fit, failing to execute on the right marketing strategies… entrepreneurs make a shopping list worth of mistakes.
So which one is the most detrimental to a business? I’ll share my thoughts on this with a short anecdotal story.
When I was still in undergrad, I really liked business plan competitions. I’ve always enjoyed giving presentations and creating new things. Business plan competitions are pretty standard across the board: Come up with an idea for a product or service and deliver a 15-30 minute presentation selling the judges on your idea. Before even getting to the presentation part, you often need to fill out a 20-30 page business plan delineating all the aspects of your business. Most people create an outline for this by using a business model canvas.
If you’re anything like I was, you may think this is the correct way to start a business. Map it all out, know every single aspect of your business, then execute it. Want to know something interesting? Out of all the business plan competitions I competed in, almost NONE of the participants ever went on to start their business idea. Want to know something even more interesting? The majority of the ones that did… weren’t the winners.
Why Business Plan Winners Never Start Their Business
Why would the winners of these competitions, some of which won grants, not follow through on their business ideas? You have the validation, shouldn’t you start working on it right away? WRONG.
There is something inherently wrong with business plan competitions. They are unrealistic. It makes you compete with the businesses around you. Think about it. There can only be one winner out of all of the presenters. This means two things are going through your mind:
1) I have to build an amazing product
2) I have to sell the hell out of it
So what you end up doing is building something you know nothing about, but sounds good on paper. People will try to create a business plan around an electric airplane, or a way to clean all plastic out of the ocean by 2030. They use all 30 pages building a well thought out business plan and create one of the best PowerPoint presentations you will ever see. I mean, how else can they stand out against the sea of all the other presenters?
However, whenever a winner is announced, they often have NO CLUE on how to actually execute on their idea. They have bitten off more than they can chew and don’t even know where to start. Yes, they came up with a stellar idea, but they haven’t created a feasible business. They are intimidated by their own creation.
What Successful Businesses Have In Common
Just for a second, think about some of the largest companies in the world. The first two that come to mind for me is Amazon and Facebook. Do you think if Jeff Bezos started Amazon by saying “I am going to create the face of e-commerce,” it would have turned into the behemoth it is today? Do you think if Mark Zuckerberg started Facebook by saying “I am going to build the biggest social media website in the world,” he would have grown it to the 2 billion monthly user platform it is now?
Of course not. Let’s not forget, Amazon started off selling books. Books… Facebook was created with the sole purpose of connecting Harvard students through an online community. These were all modest achievements that snowballed into great successes. No successful business owner knows everything that they will end up doing, nor do they have a plan of action for everything that can go wrong. They just come up with a small idea that’s actionable and they execute.
The biggest mistake founders make is that they think they have to create the biggest and baddest company on the face of the earth.– Marcus Cook
This couldn’t be further from the truth. Most companies never start this way. What they do is they pick a small niche in which they can differentiate from their competitors and grow their brand from there. I implore you to ditch the business model canvas and create a much simpler outline for a business plan. A business plan that consists of just three things:
1) Finding a problem
2) Finding a way to fix it
3) Letting people know about it
Yes, that simple. You don’t need a three-year pro forma statement, an operational breakdown of your facilities, or a million-dollar marketing plan. So why is it that most people get in their own way? The answer is pretty straightforward:
People need to believe that success is complicated… Because if it isn’t, why haven’t they accomplished it yet?– Marcus Cook
The Psychology Behind Start-Up Failure
It’s not that starting a business is so hard, it’s just that people overcomplicate it to be consistent with their beliefs that success is hard. If you want to know the power of consistency look no further than Robert Cialdini’s book “Influence: The Psychology of Persuasion.” This is a MUST READ if you are interested in how top sales professionals persuade individuals to buy their products and use their services.
One of the six weapons of influence outlined in this book is this idea of consistency. The commitment and consistency rule states that once we establish a belief, we will experience pressure from others and ourselves to behave consistently with that belief.
Since we believe that a successful business must be a large business, we are turned off by the idea of starting small. We want to create the next big thing so that we are consistent with our concept of success. However, the more complicated you make your business, the more difficult it will be to bring it to life.
There is one other reason why people overcomplicate their business. People fear what they do not know. Humans, from the beginning of time, have feared the unknown. That is why we are taught not to talk to strangers as children and why we often get anxious when put in unknown situations. This want, to control everything around us makes starting a business innately scary.
Starting a business is full of unknowns, and a consequence of this is that people take it upon themselves to know everything about their business before starting.
This is often called paralysis by analysis. When overanalyzing a situation can cause forward motion to become “paralyzed”, meaning that no course of action is decided upon. None of us will ever understand EVERYTHING that’s going to impact our business. The quicker we can come to terms with that, the quicker we can start making actual progress. A great quote by American theologian Reinhold Niebuhr sums this up nicely:
“If you are insecure, guess what? The rest of the world is, too. Do not overestimate the competition and underestimate yourself. You are better than you think.”– Tim Ferris
Throw away that business model canvas. Stop overthinking your idea. Stop trying to control everything. If you think you can help solve a problem in this world, go for it. If you want to sell body wash, who cares that there is already Dove. Do you want to help individuals with their tax returns? You don’t have to be the next H&R Block. Stop trying to be a multi-billion dollar brand and focus on a simple way to solve people’s problems. Start small, grow big, and never doubt yourself along the way. Tim Ferris said it best, “You are better than you think.”
As seen on The Success Bug